Taxes for landlords
As a landlord, what you are able to claim back as part of your taxes can sometimes be easily overlooked. We put together a list of items that should appear on your checklist when completing your tax return.
Insulation Issues
In order to keep homes warm and cosy, landlords are required to add insulation to their properties. As of 1 July 2019, if a property doesn’t meet the required standard for insulation, landlords may face fines of up to $4,000. Of course the question owners are asking is whether the upgrade or installation of insulation can be tax-deductible.The answer is a little complicated since there are factors that determine whether you may or may not claim.
If new insulation is being installed, then the expenses relating to the installation are likely to be considered an enhancement of a capital nature.This categorisation means no deduction would be allowed. If there was existing insulation that had deteriorated over time and needed to be replaced (or improved upon) to meet minimum standards, then the cost would most likely be tax-deductible. If your insulation issues fall in-between replacing and improving, then you are encouraged to contact Inland Revenue Department (IRD) to check what, if any, costs may be deducted.
Accountant Fees
Many owners opt to hire a professional accountant to tick all of the financial boxes related to their rental. Accountants will ensure full compliance with IRD and also keep an eye on expenses and revenue so that you can realise maximum profit. You can claim the fees for preparation of tax returns, account management and general advice.
Owner Maintenance
Remember, if you, as the owner, complete maintenance or repairs to your property you can deduct the cost of materials. However, you may not deduct what you estimate to be your own time spent on any given project. For example, you need to replace a leaky faucet in the kitchen.The cost of the faucet is deductible, the time you spent fixing it is not. For this reason, depending on the project, it may be wiser for you financially to hire a professional.
Record your Travel
While it can be annoying to constantly keep track of kilometres used, they can add up surprisingly quickly. Keep a notepad on your front seat or a spreadsheet on your laptop to immediately mark down any travel related to your rental property including inspections and repairs. You can calculate this expense by using IRD's kilometre rates or by claiming a percentage of the total running costs along with the depreciation of your vehicle.
Remember, if you have any questions, don’t hesitate to call IRD. If you are new to property rental, you may want to keep them on speed dial.They are always happy to help with enquiries related to deductions and compliance.
Property Management Fees
Property Management fees can also be claimed back and therefore offset against losses.
For more information contact one of our property managers.
*Always be sure to consult your tax consultant or IRD for specifics on tax-deductions.